Two weeks ago Liam Fox celebrated his 50th birthday with a high-profile bash, boasting, in a shiny blue shirt, that he had not one but two prime ministers helping him blow out the candles. Having David Cameron there was nice, but he could not have looked more pleased than to have his heroine, Margaret Thatcher, making a rare public appearance, posing for photos.

Not pictured partying with cabinet ministers and celebrities was Adam Werritty, Fox's close friend, confidant, self-styled adviser and, potentially, cause of his downfall. The Odd Couple's friendship began in the late 1990s, when Fox was an opposition spokesman for Scotland and Werritty was studying public policy at Edinburgh University.

Fox was almost 40 and a rising star of the Tory right wing, while Werritty, the unmarried son of a geography lecturer, was 17 years younger – and significantly taller. But they had shared interests in politics, the US and now, it appears, travelling the world.

Werritty left Scotland, and the family home in St Andrews, almost immediately after graduating – with a 2:2 – and started work with the healthcare company PPP. He lived at a series of addresses in London and stayed with Fox in his flat near Tower Bridge – rent-free, it has now emerged – until the senior Tory married Jesme Baird, a Scottish GP, in 2005. In a demonstration of the strength of their friendship, Werritty acted as Fox's best man.

The marriage appeared to draw a line under a colourful love life, which included Fox once being linked to former Neighbours actress and pop star Natalie Imbruglia. At the time, Fox said he hoped the relationship would end "all sorts of smears" that he "must be a playboy or a wild man or gay".

Fox later installed Werritty as executive director of his charity Atlantic Bridge, funded by the Tory donor Michael Hintze, which brought together right-wing politicians from the US and UK. "He's totally obsessed with America," one government colleague observed last night. The position earned Werritty around £90,000 over three years, but it also allowed him to travel to the US regularly for seminars and conferences.

By this time, Werritty's career had begun to shadow his friend's. While Fox was shadow health secretary from 1999 to 2003, Werritty spent two years at the helm of UK Health Ltd. A year after Fox was promoted to shadow defence secretary, Werrity became director of Security Futures Ltd.

Werritty was extending his network of contacts, but he was still relying on Fox for help. It emerged yesterday that Werritty had listed the MP's London home as his address when registering as a director of Security Futures. Fox confirmed that Werritty had "used the spare room" in 2002-03. He added: "No rent was requested or paid. To the best of my knowledge, there has never been a company registered at this address whilst I have owned the property."

During the general election campaign last year, Fox's home was burgled. His laptop, mobile phone and car were taken, although no sensitive documents were stolen and there was no sign of forced entry.

Now the knives are out for him again. Fox insists he did not know that, since he arrived at the Ministry of Defence, Werritty had been carrying two separate business cards declaring himself an "adviser" to the Secretary of State. Similarly, he has denied meeting Werritty at the MoD and taking him on official trips overseas.

When a small party of MoD staff and advisers joined Fox on holiday in Spain this summer, while the war in Libya raged, Werritty was among them. It emerged last week that Werritty had been at the Ministry of Defence 14 times in little over a year and that he popped up during Fox trips to Sri Lanka and Dubai. Worse, it was revealed yesterday that, while he was in the Middle East, Werritty arranged a meeting with the Defence Secretary for a company interested in selling technology to the MoD.

As a senior MoD source put it: "Liam has all sorts of people who come in to chew the cud." Many have been Tory MPs whose support he hoped to count on in a future pitch for the Tory leadership. After overseeing deep cuts to the defence budget, a succession of leaked letters criticising the Treasury and the decision to protect aid spending cost him support in No 10. There were reports of concern about his "partying lifestyle", which he dismissed as part of the "rufty-tufty world" of politics.

Fox stood, unsuccessfully, for the leadership in 2005, but his appointment to the defence brief in David Cameron's first shadow cabinet cemented his position as a talisman for the right. That position is looking more shaky, and friends in high places might not be enough to save him.